AUD/NZD: Divergence between Australia and New Zealand to favor the downside – MUFG
The Australian dollar is facing increasing bearish risk as zero-covid policy could weigh on growth, reinforcing the divergence with the New Zealand dollar, explained analysts at MUFG Bank. They have a trade idea of shorting AUD/NZD with a target at 1.0250 and stop-loss at 1.0750
Key Quotes:
“We have had some data releases this week that we believe will increasingly see investors question the zero-covid policy stance given the potential impact to growth if infections continue to escalate. Retail Sales in June plunged 1.8%, much weaker than expected while today the Composite PMI for July fell to 45.2, the lowest since May 2020. These developments will only reinforce the divergence with New Zealand where monetary policy will be tightened far sooner.”
“We acknowledge there is a clear risk that RBNZ rate hike expectations could well be pared back but the surge in New Zealand inflation last week (1.3% Q/Q versus 0.7% expected) we believe will leave the RBNZ more determined to remove policy stimulus assuming there are no fresh outbreaks of COVID in New Zealand.”
“NZD should be less sensitive to global developments while Australia domestic developments will add to AUD woes. New Zealand today announced the suspension of all quarantine-free travel from Australia for 8 weeks which should limit risks in New Zealand where there are currently 80 active COVID cases, with an increase of 20 in the last 24hrs and all confirmed at the border”.
The Australian dollar is facing increasing bearish risk as zero-covid policy could weigh on growth, reinforcing the divergence with the New Zealand dollar, explained analysts at MUFG Bank. They have a trade idea of shorting AUD/NZD with a target at 1.0250 and stop-loss at 1.0750
Key Quotes:
“We have had some data releases this week that we believe will increasingly see investors question the zero-covid policy stance given the potential impact to growth if infections continue to escalate. Retail Sales in June plunged 1.8%, much weaker than expected while today the Composite PMI for July fell to 45.2, the lowest since May 2020. These developments will only reinforce the divergence with New Zealand where monetary policy will be tightened far sooner.”
“We acknowledge there is a clear risk that RBNZ rate hike expectations could well be pared back but the surge in New Zealand inflation last week (1.3% Q/Q versus 0.7% expected) we believe will leave the RBNZ more determined to remove policy stimulus assuming there are no fresh outbreaks of COVID in New Zealand.”
“NZD should be less sensitive to global developments while Australia domestic developments will add to AUD woes. New Zealand today announced the suspension of all quarantine-free travel from Australia for 8 weeks which should limit risks in New Zealand where there are currently 80 active COVID cases, with an increase of 20 in the last 24hrs and all confirmed at the border”.
EUR/CHF: Downside about to end? – Commerzbank
In the opinion of Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, the downtrend in EUR/CHF could be in its final stage.
Key Quotes
“EUR/CHF is grinding lower but the recent low at 1.0798 has again not been confirmed by the daily RSI, and while we suspect this may be the end stage of the down move, but for now the market continues to weigh on the downside near term. Nearby resistance is seen at the June low at 1.0872 and also at the May 11 and 24 lows at 1.0925/27.”
“Failure at 1.0800, on a closing, would target 1.0739, the 2021 low. The 1.0736 December low is regarded as the breakdown point to the 1.0629 November low.”
In the opinion of Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, the downtrend in EUR/CHF could be in its final stage.
Key Quotes
“EUR/CHF is grinding lower but the recent low at 1.0798 has again not been confirmed by the daily RSI, and while we suspect this may be the end stage of the down move, but for now the market continues to weigh on the downside near term. Nearby resistance is seen at the June low at 1.0872 and also at the May 11 and 24 lows at 1.0925/27.”
“Failure at 1.0800, on a closing, would target 1.0739, the 2021 low. The 1.0736 December low is regarded as the breakdown point to the 1.0629 November low.”
Free Trade Ideas
GBPJPY
Buy at 151.55 (Market price),
The market may touch the 152.00 level
GBPJPY
Buy at 151.55 (Market price),
The market may touch the 152.00 level
BOC: No fireworks expected on Wednesday – BofA
Analysts at Bank of America (BofA) offer a sneak peek at what to expect from Wednesday’s Bank of Canada’s (BOC) monetary policy decision.
Key quotes
"We expect the BoC to remain on hold at this meeting with the policy rate at 0.25% and with bond purchases at C$2bn per week. Despite high inflation, the economy is still too weak to withdraw stimulus, and the US Fed is providing room to wait. A Federal Election on 20 September may be one more consideration to wait.”
"A potentially dovish tone to the statement suggests idiosyncratic downside risks to the Canadian dollar as relative monetary policy drivers remain alive and well. Still, CAD will continue to be influenced by terms of trade developments (i.e. commodity prices) and global risk appetite, both of which have rebounded of late on expectations that Fed accommodation will persist as US data have softened. We see limits to this. Per our recent forecast revision, we expect USDCAD at 1.30 at end-year."
Analysts at Bank of America (BofA) offer a sneak peek at what to expect from Wednesday’s Bank of Canada’s (BOC) monetary policy decision.
Key quotes
"We expect the BoC to remain on hold at this meeting with the policy rate at 0.25% and with bond purchases at C$2bn per week. Despite high inflation, the economy is still too weak to withdraw stimulus, and the US Fed is providing room to wait. A Federal Election on 20 September may be one more consideration to wait.”
"A potentially dovish tone to the statement suggests idiosyncratic downside risks to the Canadian dollar as relative monetary policy drivers remain alive and well. Still, CAD will continue to be influenced by terms of trade developments (i.e. commodity prices) and global risk appetite, both of which have rebounded of late on expectations that Fed accommodation will persist as US data have softened. We see limits to this. Per our recent forecast revision, we expect USDCAD at 1.30 at end-year."
USD/CAD: Ready, Steady, Fade; What's The Trade? - Credit Suisse
Credit Suisse discusses USD/CAD outlook and likes selling the pair on a rally into 1.28.
"Our stance on CAD has been to look for a retracement in USDCAD above 1.2800, above which we said we would look to go tactically short again, aiming for a 1.2450: we do not see a reason to change approach for now. The view priced into markets that the BoC will taper asset purchases again to C$1bn/week at the 27 Oct decision still seems correct; similarly, while the most recent BoC meeting failed to excite, it also provided no new reasons to second-guess the currently priced-in rates outlook, with lift-off expected to take place in Q3 2022," CS notes.
. The election, while in our view not terribly consequential for the broader CAD outlook, might nevertheless provide a catalyst for the retracement we’ve been looking for, as an example if the NDP were to perform better than expected. We stand ready to sell a spike in USDCAD to 1.2800, with a 1.2450 target and would add a stop loss to the position at 1.2950, just above the mid-Aug highs," CS adds.
Credit Suisse discusses USD/CAD outlook and likes selling the pair on a rally into 1.28.
"Our stance on CAD has been to look for a retracement in USDCAD above 1.2800, above which we said we would look to go tactically short again, aiming for a 1.2450: we do not see a reason to change approach for now. The view priced into markets that the BoC will taper asset purchases again to C$1bn/week at the 27 Oct decision still seems correct; similarly, while the most recent BoC meeting failed to excite, it also provided no new reasons to second-guess the currently priced-in rates outlook, with lift-off expected to take place in Q3 2022," CS notes.
. The election, while in our view not terribly consequential for the broader CAD outlook, might nevertheless provide a catalyst for the retracement we’ve been looking for, as an example if the NDP were to perform better than expected. We stand ready to sell a spike in USDCAD to 1.2800, with a 1.2450 target and would add a stop loss to the position at 1.2950, just above the mid-Aug highs," CS adds.
USD/JPY: Unlikely To Regain Its YTD High Of Around 111.70; Expecting A Pullback Towards 109.10 - Citi
Citi discusses the USD/JPY outlook and sees scope for a pullback towards 109.10.
"USDJPY climbed above 110.6 last week on the Fed’s more hawkish than expected statement, while the concern for the Chinese property markets eased somewhat. We don’t think the pair can regain its YTD high of around 111.7 registered in July easily and expect a pullback to around 109.1," Citi notes.
"Regarding the LDP presidential election on September 29 this week, we do not expect USDJPY to be much affected by the outcome in the near term," Citi adds.
Citi discusses the USD/JPY outlook and sees scope for a pullback towards 109.10.
"USDJPY climbed above 110.6 last week on the Fed’s more hawkish than expected statement, while the concern for the Chinese property markets eased somewhat. We don’t think the pair can regain its YTD high of around 111.7 registered in July easily and expect a pullback to around 109.1," Citi notes.
"Regarding the LDP presidential election on September 29 this week, we do not expect USDJPY to be much affected by the outcome in the near term," Citi adds.
USD/JPY: A Break Of Above 115 Possible But Risks Of An Abrupt Correction Lower Increasing - MUFG
MUFG Research warns of the scope for an abrupt correction lower in USD/JPY.
"The scale of JPY selling is looking excessive and while a breakthrough 115.00 is still possible the risks of an abrupt correction lower are increasing," MUFG notes.
"As can be seen below, the 1mth percentage change in USD/JPY divergence with the percentage change in DXY is at an extreme that looks unsustainable. A degree of USD/JPY correction lower and DXY higher tends to be the end result when these extreme divergences in performance emerge. In June 2020, a technical break of 110.00 fuelled the divergence, similar to the technical break of 112.00 on this occasion," MUFG adds.
MUFG Research warns of the scope for an abrupt correction lower in USD/JPY.
"The scale of JPY selling is looking excessive and while a breakthrough 115.00 is still possible the risks of an abrupt correction lower are increasing," MUFG notes.
"As can be seen below, the 1mth percentage change in USD/JPY divergence with the percentage change in DXY is at an extreme that looks unsustainable. A degree of USD/JPY correction lower and DXY higher tends to be the end result when these extreme divergences in performance emerge. In June 2020, a technical break of 110.00 fuelled the divergence, similar to the technical break of 112.00 on this occasion," MUFG adds.
Free Signal
✅Pair: USDJPY
⤵️Sell at 114.35
🔴 Stop Loss: 114.60
🟢 Take Profit: 113.20
✅Pair: USDJPY
⤵️Sell at 114.35
🔴 Stop Loss: 114.60
🟢 Take Profit: 113.20
USD: Fed Leadership Uncertainty Continues To Pose Risk Of Setback For USD - MUFG
MUFG Research discusses the USD outlook in light of the recent reports that the nomination of Fed Chair Powell for a second term is far from a done deal.
"The correction lower for the US dollar since the end of last week has been reinforced by reports overnight that Fed Governor Lael Brainard was interviewed for the position of Fed Chair when she visited the White House last week. If Fed Governor Lael Brainard was put forward to be the next Fed Chair market participants are likely to at least initially anticipate a more dovish outlook for Fed policy," MUFG notes.
"The building risk of a dovish outcome will encourage market participants to cut long US dollar positions," MUFG adds.
MUFG Research discusses the USD outlook in light of the recent reports that the nomination of Fed Chair Powell for a second term is far from a done deal.
"The correction lower for the US dollar since the end of last week has been reinforced by reports overnight that Fed Governor Lael Brainard was interviewed for the position of Fed Chair when she visited the White House last week. If Fed Governor Lael Brainard was put forward to be the next Fed Chair market participants are likely to at least initially anticipate a more dovish outlook for Fed policy," MUFG notes.
"The building risk of a dovish outcome will encourage market participants to cut long US dollar positions," MUFG adds.
EUR/USD: Caution Here But Down Move May Have Further To Run - MUFG
MUFG Research discusses EUR/USD outlook and shifts into a cautious bias in the very near term.
"While the scale of the move lower in such a short period of time suggests caution, there remain factors that could encourage further declines going forward," MUFG notes.
"Our FX forecasts have shown EUR as the laggard over the forecast horizon given the scope for the ECB to remain well behind most other G10 central banks in hiking rates. In October, there was a notable shift in rate expectations higher that dragged even EUR rates higher. The 3-year forward OIS for EUR turned positive in October but economic developments in the euro-zone lately and ECB communications have driven rates back into negative territory," MUFG adds.
MUFG Research discusses EUR/USD outlook and shifts into a cautious bias in the very near term.
"While the scale of the move lower in such a short period of time suggests caution, there remain factors that could encourage further declines going forward," MUFG notes.
"Our FX forecasts have shown EUR as the laggard over the forecast horizon given the scope for the ECB to remain well behind most other G10 central banks in hiking rates. In October, there was a notable shift in rate expectations higher that dragged even EUR rates higher. The 3-year forward OIS for EUR turned positive in October but economic developments in the euro-zone lately and ECB communications have driven rates back into negative territory," MUFG adds.
Free Signal
✅Pair: USDJPY
⤵️Sell at 114.70
🔴 Stop Loss: 115.15
🟢 Take Profit: 113.60
✅Pair: USDJPY
⤵️Sell at 114.70
🔴 Stop Loss: 115.15
🟢 Take Profit: 113.60
EUR: Pausing For A Breather, But Still Vulnerable - ING
ING Research maintains a bearish bias on EUR/USD in the near term.
"EUR/USD continued its fall, now trading in the lower half of the 1.12/1.13 range. While widespread dollar strength was mostly behind yesterday’s leg lower in the pair, the common currency is also dealing with a worsening of the Covid situation in Europe," ING notes.
"The data-flow is also looking unlikely to come to the rescue of the EUR. A potential pause in the dollar’s appreciation today may give EUR/USD some rest, but the risks remain skewed to the downside and the recent break below 1.1250 may have paved the way for another leg lower to the 1.1170 support in the coming days," ING adds.
Contact: @SarowarJahan
ING Research maintains a bearish bias on EUR/USD in the near term.
"EUR/USD continued its fall, now trading in the lower half of the 1.12/1.13 range. While widespread dollar strength was mostly behind yesterday’s leg lower in the pair, the common currency is also dealing with a worsening of the Covid situation in Europe," ING notes.
"The data-flow is also looking unlikely to come to the rescue of the EUR. A potential pause in the dollar’s appreciation today may give EUR/USD some rest, but the risks remain skewed to the downside and the recent break below 1.1250 may have paved the way for another leg lower to the 1.1170 support in the coming days," ING adds.
Contact: @SarowarJahan
Good news for Investors!
I have a Fund Management service that is based on a "Low Risk, Low Return" policy. It's safe and secure from any of my other services.
You have to give me access to your trading account. I will trade personally on your behalf on your trading account. At the end of the month, you have to share the profit with me.
The minimum investment is $5000.
Verified myfxbook link is available to check my performances.
If you are interested please contact me for more details
Telegram: @SarowarJahan
WhatsApp: +8801617276927
I have a Fund Management service that is based on a "Low Risk, Low Return" policy. It's safe and secure from any of my other services.
You have to give me access to your trading account. I will trade personally on your behalf on your trading account. At the end of the month, you have to share the profit with me.
The minimum investment is $5000.
Verified myfxbook link is available to check my performances.
If you are interested please contact me for more details
Telegram: @SarowarJahan
WhatsApp: +8801617276927
GBP: Starting To Look Expensive Vs EUR and USD S/T - Credit Agricole
Credit Agricole sees GBP as a little expensive around current levels against both the USD and EUR.
"Our short-term FX fair value analysis further suggests that, after the latest FX market moves, the GBP is starting to look expensive vs both the EUR and the USD. Moreover, we expect two rate hikes from the BoE this year and doubt that the MCP will be able to meet the market expectations of almost four rate hikes," CACIB notes.
"With many positives seemingly in the price of the GBP, the currency could struggle to extend its recent gains in the absence of further support from the UK rates market," CACIB adds.
Credit Agricole sees GBP as a little expensive around current levels against both the USD and EUR.
"Our short-term FX fair value analysis further suggests that, after the latest FX market moves, the GBP is starting to look expensive vs both the EUR and the USD. Moreover, we expect two rate hikes from the BoE this year and doubt that the MCP will be able to meet the market expectations of almost four rate hikes," CACIB notes.
"With many positives seemingly in the price of the GBP, the currency could struggle to extend its recent gains in the absence of further support from the UK rates market," CACIB adds.
Those who are interested in Fund Management service can start now.
The minimum starting balance is $10,000
Contact me
@SarowarJahan
The minimum starting balance is $10,000
Contact me
@SarowarJahan