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Trade Ideas For EUR/USD, USD/JPY, EUR/CHF, GBP/USD, USD/CAD - UBS EUR/USD: The range play remains intact and it is difficult to see this changing in the short term. We prefer the short side, but for now it makes no sense to aim for a larger move, with buyers expected to emerge below 1.0800 and sellers lined up ahead of 1.1000. Play the intraday moves and only get involved on the extremes.
USD/JPY:Look to go short around 118.60/70, with a stop above the post-FOMC high of 119.08. The next resistance after that is at 119.77. Support at 118.40 and 117.70.
EUR/CHF: continues to trade bid, having closed above the important resistance at 1.1050. However, interest in the pair is quite limited, which is not a very bullish sign. Look to buy dips towards 1.0990/1.1010.
GBP/USD: Whippy price action has continued. Price action suggests that interest and liquidity are very low, and that this a very transactional market. Sell Cable towards 1.4350, and buy the pair below 1.4200.
USD/CAD: We expect price action to remain very choppy. The big level on the downside is 1.4000, while the first resistance is at 1.4350. Play this range until there is a break to either side; our preference is to sell on rallies.
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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.
We shifted to a neutral stance yesterday but expect the short-term EUR/USD strength to carry it higher to test the monthto-date high of 1.0985. At this stage, a move above this level appears unlikely. That said, EUR/USD is expected to remain underpinned in the next few days with solid support at 1.0860 followed by 1.0815.
Based on the current momentum outlook, even a break above 1.0985 is not expected to lead to a rapid run-up in EUR/USD. The next significant resistance is at December’s high of 1.055/60.
GBP/USD: Neutral: Continue to expect corrective rebound to test 1.4450.
We shifted from a bearish to neutral GBP/USD stance on Monday and were of the view that the current corrective rebound could carry this pair higher to test the 1.4450 resistance. The movement thus far is within our expectation as we saw a high of 1.4407 yesterday. The undertone remains positive and we continue to expect a move to 1.4450.
Based on the current momentum indicators, a sustained break above this level is unlikely. That said, the upward pressure will continue to build as long as GBP stays above 1.4280.
AUD/USD: Neutral: Daily closing above 0.7110 would indicate start of a sustained up-move.
In line with our recent expectation, the corrective rebound in AUD/USD finally reached 0.7110. The quick pull-back from the high of 0.7129 is not surprising but upward momentum continues to improve and a daily closing above 0.7110 would indicate a more sustained up-move towards 0.7250.
Overall, the upward pressure will continue to build unless there is a move back below 0.7005/10 in the next few days.
NZD/USD: Neutral: Likely trapped between 0.6410 and 0.6555 for now.
This week, NZD/USD tested both the key resistance at 0.6555 (high of 0.6531) and the key support at 0.6410 (low of 0.6417) but failed to break through. These key levels need to break before a sustained directional move in NZD/USD can be expected.
In other words, we remain neutral for now and this pair is likely trapped between the levels mentioned above.
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EUR/USD: Groundhog Day - BofA Merrill One week on from the January ECB meeting and markets find themselves in familiar territory: attempting to anticipate the package that will be announced in March.
As ahead of the December rate decision, the market focus is likely to be on the scale of the deposit rate cut, which is the most direct instrument to weaken the EUR. In the run-up to the March meeting, comments from ECB council members are therefore likely to attract more scrutiny than data.
The impact on the Euro following last week’s ECB meeting was not as uniformly negative as it was after the October meeting, suggesting that investors are likely to be more cautious until further details emerge.
This suggests that EUR/USD could continue to trade within its current range.
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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.
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EUR/USD: Opposing Forces: Where To Target? - BTMU The EUR/USD rate did not repeat the sharp declines of January 2015 in 2016 with a more modest 0.6% decline recorded, notes Bank of Tokyo-Mitsubishi UFJ (BTMU).
Such stability, according to BTMU, reflects opposing forces that countered each other.
"Firstly, the upturn in risk aversion due to increased volatility fuelled by renewed concerns over China growth dampened speculation of an FOMC rate increase in March – falling short-term yields in the US undermined the dollar. However, at the ECB meeting in January, President Draghi was explicit in hinting that additional monetary easing may be warranted when the Governing Council next meets on 10th March.
Given the ECB only announced monetary easing in December, the explicit reference to additional easing in March does suggest divisions within the Governing Council over the failure of the ECB to meet its price stability mandate. The minutes of the meeting in December highlighted the divisions with opposition to QE, which appeared more ideological, even if inflation and growth were to slow. Certainly the developments in the crude oil market in January made achieving the 1.0% 2016 inflation forecast more difficult. While President Draghi hinted at more action, the selloff of the euro has been very limited in part due to investors’ scepticism over aggressive action given the apparent divisions within the Governing Council.
Still, the increased presence of negative yields in the euro-zone following the December deposit rate cut is likely to keep the euro under downward pressure. If risk aversion subsides, we would expect further gradual euro depreciation ahead. The net short-term securities flow on a 6mth total basis as of November amounted to an outflow of EUR 51bn, the largest since March. The net flow for long-term securities (debt & equity) was also an outflow with the 6mth sum totalling EUR 196bn. Under favourable market conditions, capital outflows are set to surpass inflows on the current account that remain at a record high.
While the ECB may now ease its policy stance in March, we doubt the action will impact monetary policy divergence expectations and fuel greater euro selling than we currently forecast. A test of parity later this year remains probable," BTMU argues.
BTMU targets EUR/USD at 1.06 by end of Q1 and at 1.03 at end of Q2.
EUR/USD: Flat Waiting For A Signal, GBP/USD: Inverted H&S - RBS The EUR/USD medium-to-long technical picture has been bearish for a while with a bear flag triggered pointing to the targets as low as 1.05 and 1.01 (with a possibility of extending a dip to 0.96 on a long-term horizon), notes RBS.
However, RBS also notes the EUR/USD near term technical picture is quite different with a sideways theme being in place for two month and 1.0950/81 marking a key resistance area and a bullish flag trigger.
"If the 1.0981 level is broken, the EUR/USD would tactically become bullish to 1.1073 on to 1.1147 and possibly even the main resistance of 1.1220," RBS argues.
"Therefore we exit any shorts and stay flat for now awaiting confirming signals," RBS advises.
Turning to GBP/USD, RBS thinks that the pair may have already seen a base around 1.4075 as inverted H&S triggered and support remains intact.
"This view has been confirmed, as the pair failed to break below 1.4075 Fibonacci swing extension and formed an inverted Head and Shoulders pattern (and accomplished a return move to the neckline level) targeting 1.4547 on to 1.4657," RBS adds.
Therefore, RBS recommends loading tactical longs to 1.4547 on to 1.4657 with a s stop on a close below 1.4180 (right shoulder level = risk level).
Tech Targets: EUR/USD, GBP/USD, USD/JPY - UOB EUR/USD: Bullish: Target a move to 1.1240.
EUR/USD punched through successive major resistances to touch a high of 1.1145, level not seen since October last year. The rally appears to be running ahead of itself and any extension higher is not expected to move significantly above 1.1240.
That said, any down-move is expected to encounter strong support at 1.1050 and 1.1000 would be a tough level to break from here.
GBP/USD: Neutral: Only daily closing above 1.4680 would indicate start of a bullish phase.
The corrective rebound target indicated in recent updates at 1.4565 was exceeded with an overnight high of 1.4649. The high is not far from the next major resistance at 1.4680. While the short-term undertone remains positive (unless there is a move back below 1.4490), we prefer to wait for a daily closing above 1.4680 before shifting to a bullish stance.
In other words, we are not certain that the current GBP/USD strength can be sustained in the coming days.
USD/JPY: Neutral: Expect choppy trading within a broad range.
The shift to a neutral stance yesterday was timely even though we clearly do not anticipate such a sharp drop to 117.03. In view of the extreme volatility, we believe it is too early to expect a sustained down-move at this stage. From here, we think only a clear move below the recent low near 115.95/00 would indicate the start of a bearish phase.
In the meanwhile, the elevated volatility could lead to a period of choppy trading within a very broad range.
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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD - UOB EUR/USD: Bullish. Approaching major resistance at 1.1270, clear break would signal mid to long-term bottom is in place.
EUR/USD rallied strongly this week and the up-move is quickly approaching the major mid to long-term resistance at 1.1270. This level is the middle of the weekly trading envelope and if EUR can close above this level by end of today’s NY session, it will be the first time it has done so since October 2014. The middle of the envelope was tested in August last year (just above 1.1710) but the closing was below this crucial level. A clear break above this level would be a strong signal that EUR has found a mid to long-term bottom and the upside pressure will likely continue to build in the coming weeks and possibly months.
For now, 1.1240/70 is a strong resistance zone but we would target a move to 1.1495 near term if there is a clear break above this zone.
GBP/USD: Neutral: Only daily closing above 1.4680 would indicate start of a bullish phase.
There is no change to our view wherein only a daily closing above the major 1.4680 resistance would indicate the start of a sustained up-move in GBP.
In the meanwhile, the undertone still appears to be slightly positive as long as the strong support at 1.4490 continues to hold.
AUD/USD: Bullish: Target a move to 0.7260.
We shifted to a bullish stance yesterday targeting a move to 0.7260. Currently, there is no change to the view.
A break above 0.7260 would shift the focus to 0.7330.
NZD/USD: Bullish: Target a move to 0.6800.
We turned bullish NZD yesterday and the immediate target at 0.6740 was quickly met (high of 0.6747).
The rally appears to be running ahead of itself and from here, those who are long should take some profit near 0.6800.
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Last week’s signals resulted in a 1.9% gain. In particular, the long JPY position performed well.
The next G10 FX Financial Scorecard signals are due to be sent out on 15 February.
USD: History Repeats Itself So Elegantly - Deutsche Bank The bullets and charts below show how history is partly repeating itself in interesting ways. Figure 1 shows the current DXY (the bar) since Sep 2014, with a line chart of the DXY between 1996 and Feb 1998. Beyond the way the charts are tracking - and one has to be wary of being too cute in finding a best fit - the really interesting aspect is that the DXY is also at almost exactly the same levels as in this period! It is rare that history repeats itself so elegantly.
It is easy to forget that even in the middle of a USD bull market the DXY ended 1998 down on the year, as illustrated by Chart 2.
An extension of the chart in beyond Feb 1998 shows what happened. The DXY went sideways through mid-1998 before weakening sharply, partly on the back of a much stronger yen that plummeted from Y145 to Y115 versus the USD. As much by default, the yen in current circumstances remains the most likely currency to benefit from a USD pause – see below.
In the big USD cycle, 1998 was the pause that refreshed the USD, as Fed rate cuts in 1998 were more than reversed, and the tech bubble went into overdrive.
1998 included numerous shocks of which the Russia crisis and the LTCM collapse, were among the major risk-off events. In the end, US trend growth near 4% carried the day, and of course the Fed could and did ease by 75bps - actions that reinforced the view of a ‘Greenspan put’ and contributed to the equity bubble.
Presently, the other cross currents are mostly more USD friendly, if only because there are even more limited alternatives to the USD than in 1998. At a minimum, as long as there is a meaningful risk of significant Rmb slippage, it will keep the USD broad TWI bid.
...The 1998 yen reversal was partly triggered by Fed- BOJ joint intervention, included a major exit of short yen carry trades. This time around, the issue is the relatively low hedge ratios that many Japan long-term investors have on their foreign investment.