Weekly forecast - page 9
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Here Are The 3 Strongest Quant Signals This Week - SEB Long EUR/PLN, Short GBP/USD, and Short NZD/USD are the strongest quant signals this week based on the normalized measures of trend strength, stretch, and excess volatility, data from SEB FX-o-Meters models showed on Tuesday.
"A note of caution is that RBNZ has a rate meeting on Wednesday evening (CET) that may cause disruption to a trend trade and that's why a pure trend trade should be exited ahead of the meeting and only re-entered if the trend continues afterwards," SEB advises.
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD - UOB EUR/USD: Neutral: A test of the month-to-date high of 1.0985 will not be surprising but a sustained up-move is unlikely.
The breach of the 1.0905 stop-loss yesterday nullified our bearish EUR/USD view. While the undertone remains positive, the current movement is unlikely to be part of a directional move.
We are neutral now but the short-term bias is for a move higher to test the month-to-date high near 1.0985 even though a sustained move above this level appears unlikely. Strong support is at 1.0815.
GBP/USD: Neutral: In a corrective recovery now.
The recent build-up in upward momentum fizzled out quickly with the move back below the 1.4285 support. However, the current price action is viewed as part of a broad consolidation phase and not the start of a sustained directional move.
As long as the solid support at 1.4150 is intact, the current corrective recovery in GBP/USD has the scope to extend higher to test the major 1.4450 resistance (even though a break above this level is not expected).
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EUR/USD: Still Struggling For Direction: Range & Outlook - BTMU The euro has continued to remain relatively stable against the US dollar so far this year, notes The Bank of Tokyo Mitsubishi UFJ (BTMU).
"There has been limited directional impact from the recent more dovish signals from both the ECB and the Fed which have cancelled each other out in the nearterm. President Draghi has provided a strong signal that further ECB easing is likely in March weighing on the euro. The latest FOMC statement displayed a more cautious tone as well supporting market expectations that further Fed tightening will be only very gradual.
The downward correction in risk assets and crude oil has lost momentum recently reducing upside risks for the euro," BTMU argues.
BTMU sees EUR/USD trading in 1.08-1.11 range in the near-term.
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Week Ahead: NFP, RBA, FX Wars, GBP Squeeze, Sell AUD, NZD Rallies Market risk sentiment has recovered of late thanks to the more cautious January Fed statement, a surprise rate cut into negative territory by the BoJ and a consolidation of global commodity prices. The fact that things seemingly have gone a bit quieter on the ‘eastern front’, mainly because of the empty data calendar in China, has helped as well.
The calm maybe deceiving and the bulls maybe heading to a ‘China’ shop. Indeed, potential disappointments from the China PMIs could well halt the risk bounce in its tracks. Apart from the RBA, which may sound extra dovish just to keep AUD from bouncing further, there will not be many central bank speeches to sooth market nerves further.
We remain constructive on USD against the background of raging global currency wars that should more than offset the negative impact of the recently more dovish Fed. Next week’s US data calendar could further boost policymakers’ confidence in the near-term outlook of the US economy and even inflation, and help USD.
GBP looks oversold to us and more indications that PM Cameron and his EU colleagues are inching closer to a deal could help the currency consolidate. The BoE Inflation report should not trigger another bout of re-pricing of BoE rate hike prospects and, with so many negatives in the price by now, that could leave GBP as a prime candidate for a short squeeze.
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What we’re watching:
FX Focus – Foreign borrowers should continue to issue EUR-debt in the Eurozone, and convert the proceeds into USD in the FX spot and forward market, keeping EUR/USD under selling pressure.
AUD – Next week’s Chinese business activity data should prove the currency’s main driver. We expect rallies to remain a sell.
GBP – We see limited scope of next week’s BoE announcement and inflation report pushing GBP lower.
USD – Next week’s payrolls report should prove constructive enough in order to prevent rate expectations and the greenback from falling further.
NZD – The policy outlook should keep the NZD a sell on rallies.
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EUR, GBP, CHF, CAD, AUD, NZD: Weekly Outlook - Morgan Stanley EUR: Temporary Strength. Bullish.
We are tactically bullish on the EUR despite the ECB essentially preannouncing further easing measures in March. A lot is already priced into the curve, with the markets currently expecting a 10bps reduction in the deposit rate from Draghi. Additional QE we do not think will be sufficient to bring the EUR materially lower. In order for the ECB to have a significant impact on the common currency, it will need to change expectations for the cost of funding. And currently, there seems to be strong resistance against bringing the deposit rate much lower.
GBP: Need to Watch Oil And Volatility. Neutral.
GBP is one of the most sensitive currencies to volatility in the G10. Its sensitivity to oil prices has also increased over recent weeks as the UK equity market is heavily exposed to commodities. If risk appetite picks up this week in commodity markets then we could see GBP rally. However we would use this rebound to sell because the longer term issues still remain for the economy. We will be watching the conversations between David Cameron and the EU closely for a potential referendum date.
CHF: Selling CHF. Bearish.
A risk rebound should add further momentum to the weakening CHF. Our bearish story, however, goes beyond the global economic outlook. Swiss 10 year bond yields remain below zero suggesting that pension funds and asset managers may have to look abroad for stronger returns, which would weaken the CHF. We continue to monitor the sight deposit data to see if the SNB has been intervening. We think the SNB prefers this method of easing over cutting rates in response to the ECB.CAD: A Temporary Respite. Neutral.
We believe that CAD may see a temporary respite in an environment of stabilizing oil prices and a more cautious Fed. However, our medium term narrative remains unchanged. The great rotation that the BoC has been hoping for isn’t happening; manufacturing and non-commodity trade finished 2015 on a soft note and have shown little signs of rebound. Moreover, the Business Outlook Survey showed the weakest hiring and investment intentions since the crisis. We expect the BoC to shift toward a more dovish stance later this year, catalyzing more CAD weakness.
AUD: Picking Up Carry. Bullish.
Chinese authorities have brought back a period of calm, keeping the USDCNY fix stable over the past week. Coupled with liquidity injections ahead of the lunar new year, this dampening of volatility is likely to temporary support carry trades. From a fundamental perspective, Australian inflation and growth numbers both surprised to the topside too. As such, this week we enter into tactical AUD longs against CHF.
NZD: Responding to Risk. Neutral.
The New Zealand economic outlook doesn’t seem to be picking up. Inflation is low, Fonterra has reduced its payout to farmers and milk auction prices continue to fall. Supported by a dovish RBNZ, there seem enough reasons to be short the NZD for the medium term. This week we would wait for the rebound to sell as risk appetite being supported should help the carry currencies. A better short postion would be against the AUD, which has broken out of its trend channel.
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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD - UOB EUR/USD: Neutral: Weak undertone but only daily closing below 1.0775/80 would indicate start of bearish phase.
While the rapid and sharp drop last Friday was unexpected, we are not convinced that the current movement is the start of a sustained down-move in EUR/USD. However, the undertone is clearly weak but only a daily closing below 1.0775/80 would indicate the start of a bearish phase.
Even then, the downside potential is likely limited to a retest of last month’s low near 1.0710.
GBP/USD: Neutral: 1.4410/15 is extent of corrective rebound, in a broad 1.4080/1.1.4420 range now.
The sharp drop last Friday indicates that the 1.4410/15 high is the extent of the corrective rebound and the ideal level of 1.4450 mentioned previously is not met.
The outlook from here is rather mixed and this pair is expected to trade in a broad 1.4080/1.4420 range, at least for another several more days.
AUD/USD: Neutral: Daily closing above 0.7110 would indicate start of a sustained up-move.
As mentioned last Friday, despite improving momentum, only a daily closing above 0.7110 would indicate the start of a sustained up-move in AUD/USD.
In the meanwhile, this pair is expected to trade sideways, albeit with a positive tone with strong support at 0.7005/10..
NZD/USD: Neutral: Likely trapped between 0.6410 and 0.6555 for now.
There is not much to add as NZD/USD popped higher last Friday but did not threaten the key resistance at 0.6555.
The outlook remains mixed and we continue to hold the view that this pair is likely between 0.6410 and 0.6555 for now.
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FX Trading Strategy For The Week - SocGen
The same CFTC data which show yen longs growing as of last Tuesday show the net long dollar position topping-out and the net Euro short being reduced slightly. So many traders have been beaten up by January’s gyrations that position reduction is the order of the day and unless we get a barnstorming NFP figure on Friday, the risk is still that EUR/USD breaks the topside rather than bottom side of its recent range.
That argues for longs in EUR/GBP, at least for the first four days of the week.
Otherwise, there’s no change to my desire to be short NZD/CAD and CHF/SEK. Once upon a time the Swedes were special for having negative rates but these days, not so much: Now they’re just special for having better growth than most.
EUR/USD: Possible Breakout, USD/JPY: Limited Upside - SocGen The softness of the US manufacturing data may be supplanted as a focus for markets by Friday’s labour market report, or indeed by tomorrow’s services ISM data, but for now, it’s going to act as a drag o the dollar relative to both the Euro and even the yen (at least when risk aversion is the order of the day). So short term, I’ll stick with the idea of a possible breakout to the upside in EUR/USD even if the range remains frustratingly tiny.
As for the yen, there’s no real change in my thoughts – the impact of a shift to negative rates in Japan is likely to have far less impact on the yen than the ECB’s move had on the Euro, partly because the yen’s valuation is so stretched and partly because Japanese investors have long since embraced the idea of looking for higher yields abroad. The limiting factor behind Japanese capital outflows (and hence a weaker currency) is the lack of attractive foreign destinations for their money. The yen remains a funding currency and upside in USD/JPY remains limited.
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EUR/USD: A Trade Idea To Position Into Next Month ECB? - NAB Short EUR/USD near 1.10 (or lower) into ECB:
Ahead of the ECB on 10 March, we would like to establish a short on any return close to the January highs near 1.10.
BoJ actions and their influence on ECB (and global) rate expectations has reduced the chances of EUR/USD moving into the 1.1050-1.1170 area where we were previously looking establish shorts.
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB EUR/USD: Neutral: Only clear break above 1.0995/00 or below 1.0775/80 would indicate start of a directional move.
There is not much to add as EUR/USD continues to trade quietly albeit with an improving undertone. EUR/USD extended its recent gains without testing the 1.0850 support first but as expected, failed to move clearly above 1.0940 (overnight high of 1.0940). While the undertone remains positive, upward momentum is patchy at best.
At this stage, only a strong and impulsive break above 1.0995/00 or below 1.0775/80 would indicate the start of a sustained directional move. In the meanwhile, we continue to hold a neutral view.
GBP/USD: Neutral: Rebound has scope to extend to 1.4565.
We continue view the current movement as a corrective rebound that has scope to extend higher to test the major 1.4565 resistance.
Overall, this pair will remain underpinned in the coming days unless there is a move back below 1.4240 in the next few days.
AUD/USD: Neutral: Outlook still remains neutral.
As we have pointed out several times in recent updates, despite the short-term AUD/USD strength, only a daily closing above 0.7110 would shift the current neutral outlook to bullish.
The quick drop from the high of 0.7130 yesterday is a clear sign that the recent short-term upward pressure has eased but it is too early to expect a sustained down-move. In other words, we remain neutral for now.
NZD/USD: Neutral: Too early to expect a sustained rally.
NZD/USD edged above the major 0.6555 resistance yesterday with a high of 0.6558. While momentum is improving, it is too early to expect a sustained up-move. Even a clear break above 0.6555 is expected to encounter very strong resistance near 0.6605/10.
That said, the short-term undertone is clearly positive and this pair is expected to remain underpinned in the next few days.
USD/JPY: Neutral: Those who are long to take partial profit at 122.00.
While we were right in anticipating a short-term top, the sharp drop that took out the major 120.00 support was unexpected. The down-move appears to have scope to extend lower but a sustained move below 119.40 appears unlikely.
The outlook for this pair is viewed as neutral and the current movement is likely the early stages of a broad and choppy consolidation phase. Key levels are at 117.65 and 121.70.