Current short term Forecast - page 10
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
EUR/USD: Neutral: Bearish if daily closing below 1.1120.
As indicated yesterday, despite the strong rebound postnonfarm payrolls, the undertone for EUR is still negative. Based on the current price action, a daily closing below 1.1120 is enough to indicate the start of a bearish phase (for an immediate target of 1.1050). Overall, this pair is expected to remain under pressure unless it can move and stay above 1.1200 within the next few days.
USD/JPY: Bullish: Increasing risk of a short-term top.
The pair dipped to a low of 102.78 yesterday. While the downward pressure appears to have eased with the subsequent strong recovery, USD/JPY has to punch above the major 104.15/30 resistance or the risk of a short-term top could not be ruled out just yet.
GBP/USD: Bearish: Next support at 1.1500 [No change in view]
The rapid decrease in volatility after the ‘flash crash’ on Friday was unexpected. While the bearish phase that started in mid-September is still intact, the 1.1500 level may not be revisited so soon, if at all. That said, confirmation of a shortterm low is only upon a move back above 1.2610
AUD/USD: Neutral: In a 0.7500/0.7710 range.
There is no change to our neutral view on AUD and we continue to expect this pair to trade in a broad 0.7500/0.7710 range for now.
NZD/USD: Bearish: Low odds for an extension sharply below 0.7050.
NZD is hovering just above the recent low of 0.7110 and while a move below this level would not be surprising, the odds for an extension sharply below 0.7050 still do not appear to be very high. That said, confirmation of a short-term low is only upon a move above 0.7205.
EUR/USD: Shift from neutral to bearish. target a move to 1.0950
We have highlighted several times in recent updates that a daily closing below 1.1120 would shift the outlook for EUR to bearish. The condition was met yesterday as EUR dropped sharply in overnight trading and is currently hovering around the next major support near 1.1040/45 (minor low in early August & rising trend-line support). Based on the current momentum, a move below this level would not be surprising and would shift the focus towards 1.0950 followed closely by the 1.0910 low seen on the day of Brexit. If the current price action is a ‘valid break’, any short-term recovery should be shallow and should not move back above 1.1140/45.
GBP/USD: Bearish: Next support at 1.1500
There is no change to the view wherein the current GBP weakness could revisit 1.1500. That said, this level seems rather far at this stage and may not be seen so soon. Overall, only a move back above 1.2470 (adjusted from 1.2610) would indicate that the current bearish phase in GBP has ended
USD/JPY: Bullish: Increasing risk of a short-term top. [No change in view]
The pair dipped to a low of 102.78 early this week. While the downward pressure appears to have eased with the subsequent Recovery, USD/JPY has to punch above the major 104.15/30 resistance or the risk of a short-term top could not be ruled out just yet.
AUD/USD: Neutral: Bearish if daily closing below 0.7510.
AUD dipped below the lower end of the expected sideway consolidation of 0.7550/0.7710 yesterday (low of 0.7533). The underlying tone has deteriorated but only a daily closing below 0.7510 would indicate that the current neutral phase has shifted to bearish. All in, AUD has to move and stay above 0.7600 within these 1 to 2 day or the downward pressure would continue to grow.
NZD/USD: Bearish: Next support at 0.7010.
NZD continues to surprise us by not only taking out the 0.7110 support but extended its decline and edged below the major level of 0.7050 (overnight low of 0.7048). While the decline is very over-extended now, only a move back above 0.7160 (adjusted from 0.7205) would indicate that the current bearish phase has ended. Otherwise, another leg lower towards the next major level of 0.7010 could not be ruled out just yet (0.7010 is the rising trend-line support connecting the two major lows seen in January and May).
EUR/USD: Bearish: Target 1.0950.
We just turned bearish EUR yesterday and there is no change to the view. The immediate target is at 1.0950 followed closely by the 1.0910 low seen on the day of Brexit.
USD/JPY: Bullish: To take partial profit at 105.00.
We are still uncomfortable with the technical signals and those who are long (bullish phase started last week) should look to take at least partial profit at 105.00. Stop-loss should be placed at 102.70 even though the move back below 103.80 is an early indication that a short-term top is imminent.
GBP/USD: Bearish: Next support at 1.1500.
There is no change to the view wherein the current GBP weakness could revisit 1.1500. That said, this level seems rather far at this stage and may not be seen so soon. Overall, only a move back above 1.2360 (adjusted from 1.2470) would indicate that the current bearish phase in GBP has ended.
AUD/USD: Neutral: Bearish if daily closing below 0.7510.
The underlying tone for AUD remains weak but as highlighted yesterday, only a daily closing below the rising trend-line support at 0.7510 would indicate the start of a bearish phase. This appears to be a likely scenario unless AUD can reclaim 0.7600 within these 1 to 2 days. The immediate target below 0.7510 is at the September’s low of 0.7445.
NZD/USD: Bearish: Next support at 0.7010.
While downward momentum is showing sign of slowing down, the current bearish phase in NZD is intact until the 0.7110 is taken out. The focus now is at 0.7010 but this is a major support and may not yield so easily. In the event of a clean break below 0.7010, the focus would shift to the 0.6950/55 low seen in July.
Trading The BoC - Views From Major Banks
Morgan Stanley: Bearish CAD Into BoC; Sell CAD Vs AUD & NZD
We remain bearish on CAD ahead of this week's BoC meeting where we expect a dovish outcome. In its previous meeting, the BoC stated that inflation risks have tilted somewhat to the downside and growth may be somewhat lower than anticipated in July, softening the hawkish tone that it had been adopting so far despite weak economic data. Deputy Gov. Wilkins reiterated these themes in her speech last week. This increases the possibility of the BoC cutting rates over the next few months, particularly in light of weakening inflation data. 3Q growth expectations have improved somewhat in recent weeks due to better July GDP and a narrower trade deficit but we are still skeptical the BoC's forecasts will be reached. Given the markets are pricing only a few bps of rate cuts for this year, and CAD has the largest long positioning in G10, we think further data weakness could weaken CAD significantly. We like selling CAD against other commodity currencies.
CIBC: BoC On Hold With A Dovish Tone; Already Priced In.
Much of what the Bank of Canada will say this week already be priced in. Governor Poloz is unlikely to cut rates immediately, and the market should already have taken note of hints of a downgrade in the BoC’s medium term growth forecast. But if there’s any reaction in the currency, it will be a modest weakening. The OIS futures market has not priced in any chance of an ease in the quarters ahead. While our base case also has a flat path for Canadian overnight rates, don’t be surprised if the market prices in some chance of a cut in the months ahead. New mortgage rules should reduce the BoC’s fear that a rate cut would fuel a more worrisome housing bubble, and might raise concerns of that a slowing in homebuilding will eat into growth. Look for a dovish tone in the Bank’s message to at least open the door a crack to a rate cut if necessary, a contrast to a more hawkish Fed. That’s reason enough to stay short the loonie even as oil creeps higher.
Credit Agricole: BoC On Hold; CAD Decoupled From Oil Prices.
The CAD has largely decoupled from oil prices recently. Diminished prospects for a Trump presidency have allowed the CAD to regain some ground on the crosses. However USD/CAD remains supported by the broader USD trend and the further widening in the US-Canada rate differentials. Canadian data has improved recently, albeit from weak levels. Against this backdrop we expect the BoC to remain on hold on 19 October as is widely anticipated. In terms of forward guidance, the BoC is likely to re-iterate that risks to its outlook are somewhat to the downside. The accompanying Monetary Policy Report should revise down the 2016 growth forecast, as was already signalled in the September statement, but we expect the BoC to continue to signal a pick-up in growth going forward thanks to fiscal stimulus and stronger economic activity south of the border. We suspect that the BoC will remain sensitive to the incoming inflation data and we will be watching closely the core CPI reading in the September inflation release next week.
Nomura: BoC On Hold With A Dovish Tone.
We expect the BoC to leave its policy rate unchanged at this week’s meeting. We also believe that it will reiterate that risks on inflation remain tilted to the downside and that it will lower its growth forecast in its Monetary Policy Report. We continue to believe that the BoC will leave its policy rate at 0.50% for the rest of the year. We think there are two key questions to consider: 1) is the recent rebound in export performance sustainable, given continued underperformance is non-energy, and 2) what will be the impact of the fiscal stimulus? Until we get more concrete answers on these points, we expect the Bank to retain its wait-and-see approach. However, if further stimulus is judged necessary, we believe it is more likely to come from fiscal policy than from monetary policy
Barclays: BoC On Hold; A Non-Event For CAD.
We and consensus expect the BoC to keep its target for the overnight rate unchanged at 0.5% in its policy meeting on Wednesday. The bank changed its tone in the last meeting in September, dropping the emphasis on a recovery led by non-energy exports and highlighting increased downside risks to the inflation outlook. The latest CPI print came below expectations but stronger trade and employment data, and the expected oil-driven rebound seen in monthly GDP, have been welcome developments for the BoC. The bank is likely to highlight these recent positive data prints while acknowledging that the adjustment process in the economy continues. The Monetary Policy Report will be released and the BoC is likely to modestly revise down its forecasts for inflation and growth because of weaker non-energy exports than anticipated in the July report. Markets are pricing no change for the BoC and the meeting should be a non-event for the loonie if there is no major shift in rhetoric, as we expect.
BofA Merrill: BoC To Stay Put; Limited Impact For CAD.
The BoC will likely remain on hold at its policy meeting, but will play a balancing act. Our baseline view is that the BoC meeting will not likely have a sharp impact on the C$, unless there is a substantial difference in terms of their longer-term view. Despite the likely lack of impact for this meeting, we stress monetary policy differentials between the BOC and the Federal Reserve have been key in driving USD-CAD this year. Indeed, as of late, CAD has not gained much on the back of the recent improvement in oil prices, despite broadly being a commodity currency. In contrast, relative monetary policy has been the more crucial driver for CAD over the past year. The increased relative likelihood of a Fed rate hike has been outweighing the usually positive impact of higher oil for CAD, and nudging USD-CAD higher. Combined with our view that most outcomes of the US election are USD-positive on a medium-term basis, we consequently hold our forecast for the end of the year for USD-CAD of 1.34.
source
EUR/USD Into ECB: Targets For 3 Scenarios
1. The ECB is clear and impressively decisive about its easing intentions: we suspect this would be enough to allow for a push towards EURUSD technical support levels around 1.09. If these do break then the natural extension would be to push on towards one-year lows around 1.06 in the weeks ahead, especially if the market is also prepared to price in a resumed Fed tightening cycle with more confidence.
2. The ECB is vague about its likely next actions – this would argue against a near-term range breakout lower for EURUSD, especially if there is any form of squeeze higher in euro area rates. We would expect a move back above 1.10 towards 1.12 in this scenario.
3. The ECB validates the recent speculation in the press about tapering by pointing towards this course of action for 2017: this would likely take EURUSD back towards 1.15 over coming weeks, especially if the market is unsure about the probability of a Fed hike in December. It could also create a virtuous cycle for the currency in that the market may suspect that the ECB anticipates better growth and inflation outcomes and would provide a boost to the many market participants who are looking at the glass as half full for euro area macro performance going into 2017. With oil prices and euro area marketbased inflation expectations on the rise anyway, all it would take would be a relatively positive reaction from European equity markets to more market participants that the worst may be over for the economy and that the need for still-looser monetary policy is much diminished.
source
EUR, CHF, GBP, AUD, NZD all dripping lower
In my view, EURUSD has already given a break below its psychological significant level of 1.10 leading to technical sell off in the pair.
USD: Further Gains Expected. Bullish.
We increasingly believe the USD is moving back to its long-term bullish trend, driven by two factors. First, the closing US output gap and its implications on monetary policy should move rate and yield differentials in favour of the USD. Second, should global yield curves continue steepening as inflation picks up,volatility could rise and risk appetite could get hit, resulting in USD-supportive repatriation flows. We expect USD strength to be most pronounced against low-yielding currencies (low-yielding AxJ, JPY and SEK) while high yield EM currencies with good fundamental stories may stay relatively resilient.
EUR: Stay Strong on the Crosses: Neutral.
The latest ECB meeting did not reveal any new information and put all attention on the December meeting instead. EURUSD break below the Jun low of 1.0913 could open downside to the February/March low of around 1.0820. On the crosses, however, EUR is likely to remain supported. Should global and EMU inflation continue rising, ECB tapering talk could come back into focus and the current rate cut priced by the markets may be reduced, supporting the currency. In this scenario, global yield curves may also continue steepening, which could hit risk appetite, providing further support for EUR crosses.
JPY: Use USDJPY Dips to Buy*. Bearish.
We expect further USDJPY strength and view the current setback as a buying opportunity. With the BoJ's yield curve management and steepening of global yield curves, financial institutions' profitability may improve over time, increasing their willingness to lend domestically and abroad which will weaken the JPY. Market consensus remains bullish JPY with long positioning reaching extreme levels. Should sentiment start to shift, an unwind of these positions could generate a significant reversal in USDJPY to the upside. Additionally, given the increasing hedging costs, Japanese investors may now invest abroad on an FX-unhedged basis, further weakening the JPY.
GBP: Corrective Rebound. Neutral.
We changed our forecasts to expect more GBP weakness in coming quarters and little recovery next year. However, we expect some short-term rebound due to the market's large short positioning and signs of the government rethinking its hard stance on Brexit, including allowing Parliament to vote on Brexit negotiations. We think the improvement in the news flow gives GBPUSD upside potential to 1.2650, where we would sell again as investment weakness and political uncertainty are likely to weigh on GBP in the medium term. This week, we watch GDP but note that any positive surprise will provide short-lived support for the currency as GBP is predominantly driven by politics currently.
CAD: Turning Neutral. Neutral.
In the latest meeting, the BoC revised their inflation and growth forecasts down and changed their wording on inflation risks to be "roughly balanced", which was less dovish than markets expected. However, Governor Poloz later said that the bank actively discussed the possibility of adding more stimulus, though it would require a shock or series of shocks for them to ease further. We think this means the Bank is willing to act if the economy takes another dip, but would need shocks such as a significant drop in oil, severe slowdown in the US economy or a US presidential outcome that could change NAFTA for them to deliver more easing. These scenarios look unlikely for now, therefore we turn neutral on CAD.
AUD: DataWatching. Bearish.
AUDUSD has reversed after reaching the upper end of its trading channel following the weak September labor market report, giving it some more room for correction. With mining investment staying weak and the housing market set to slow down, the RBA may need to cut rates further to stimulate the economy. A further steepening of global yield curves and increased pricing of Fed hike probabilities could also hit risk appetite, pushing AUDUSD lower. This week, all eyes will be on CPI and new home sales. Should CPI follow the global trend in inflation and print stronger than expected, AUD could receive a boost but we would use the rally to sell. Accordingly, we add a limit order to sell AUDUSD in our portfolio.*
NZD: Tactical Short*. Bearish.
NZD has the largest potential for correction within G10 in an environment of USD strength and steepening yield curves, in ourview. The RBNZ changed its most recent statement very little despite improving growth data and milk prices and also pointed to slowing house price appreciation. Nonetheless, we believe only an aggressive easing cycle will push NZD substantially lower and we won't get more clarity on this until the November MPS. Inflation remains low, but even if the RBNZ does small amounts of easing, it is difficult for the central bank to weaken the currency in a time when markets are looking for anything high yield. What can push NZD lower for now is a fall in risk appetite or Fed rate hikes.
source
Fade USD/CAD Into 1.34; Look To Buy EUR/USD Near 1.08
The USDCAD thrill ride persists. Notably, we are now back above 1.33 following the overnight dip to a low near 1.3280.
We still see scope for continued CAD underperformance given the BoC rate cut theme has further room to run. The shift in rate differentials has seen our USDCAD equation inch higher, suggesting it is slightly overvalued. We see strong resistance ahead of 1.34 (upper end of our valuation band) so would look to fade there. Consistent with the weaker CAD theme in the majors we also like EURCAD higher.
Market positioning has seen a notable shift over the past few months. The USD is now flat after reaching record shorts earlier in the year. This change in positioning reflects in markets focus on December rate hike, diminished political uncertainty in the US (and possible fiscal support) and a potential drop in FX reserves from countries like China that have recently seen a drop in reserve flows. The latter could reflect a drawdown in other major currencies for the greenback.
...We think this leaves the USD confined to its recent range but are cautious about chasing the rally at current levels. Our highfrequency models favor some upside in European currencies as both SEK and GBP look cheap.
We also like to think there is value in long EUR positions near 1.08.
source