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
USD: Here Is Why Betting On risk Aversion And THE next Big USD Rally Is Risky - Credit Agricole
Credit Agricole CIB Research discusses the market outlook and argues that a sustained spike in risk aversion is unlikely.
"We doubt that the Fed will be considerably more hawkish than expected by the markets, in part because we believe that US inflation peaked in March-April – a view that is expected to be confirmed by the US CPI data on Friday. In addition, global PMIs outside China are not suggesting that a global downturn is imminent, while the outlook for the Chinese economy itself could improve now that the pandemic lockdowns are being lifted.
Last but not least, a record amount of USD cash is sitting on the sidelines. In turn, this could mean that buyers on dips could emerge to prop up both the stock and FI markets," CACIB notes.
"We, therefore, doubt that we will see a sustained spike in risk aversion and thus the next big rally of King USD in the near term. The only exception to that could be USD/JPY where the lack of meaningful FX intervention threat seems to have emboldened the bull," CACIB adds.
Credit Agricole CIB Research discusses the market outlook and argues that a sustained spike in risk aversion is unlikely.
"We doubt that the Fed will be considerably more hawkish than expected by the markets, in part because we believe that US inflation peaked in March-April – a view that is expected to be confirmed by the US CPI data on Friday. In addition, global PMIs outside China are not suggesting that a global downturn is imminent, while the outlook for the Chinese economy itself could improve now that the pandemic lockdowns are being lifted.
Last but not least, a record amount of USD cash is sitting on the sidelines. In turn, this could mean that buyers on dips could emerge to prop up both the stock and FI markets," CACIB notes.
"We, therefore, doubt that we will see a sustained spike in risk aversion and thus the next big rally of King USD in the near term. The only exception to that could be USD/JPY where the lack of meaningful FX intervention threat seems to have emboldened the bull," CACIB adds.
JPY: New Day, New Lows; Increased Speculation On Japan Intervention To Slow The Move - MUFG
MUFG Research discusses the JPY outlook and flags a scope for increased speculation on Japan intervention.
"The speed of the move in yen depreciation is certainly now on a par with what we had during much of March and April and at higher levels, there will be inevitable increased speculation on Japan intervention to at least slow the move," MUFG notes.
"Governor Kuroda did say today that rapid yen selling is “undesirable” but it would be difficult at this juncture for the MoF to justify yen buying intervention given the actions of the BoJ. If US yields remain underpinned over the short-term yen selling momentum will likely persist," MUFG adds.
MUFG Research discusses the JPY outlook and flags a scope for increased speculation on Japan intervention.
"The speed of the move in yen depreciation is certainly now on a par with what we had during much of March and April and at higher levels, there will be inevitable increased speculation on Japan intervention to at least slow the move," MUFG notes.
"Governor Kuroda did say today that rapid yen selling is “undesirable” but it would be difficult at this juncture for the MoF to justify yen buying intervention given the actions of the BoJ. If US yields remain underpinned over the short-term yen selling momentum will likely persist," MUFG adds.
USD/JPY: Rally To Accelerate Further If USD/JPY Breaks Above 135.15 - MUFG
MUFG Research discusses USD/JPY outlook and sees a scope for further gains in the near-term.
"The BoJ’s contrasting stance with other major central banks leaves JPY vulnerable to further weakness in the near-term at least while the sell-off in global equity markets has paused for now. It has been notable that renewed yen selling pressure in recent weeks has also coincided with a relief rally for global equity markets," MUFG notes.
"Yen weakness is likely to accelerate further if USD/JPY breaks above 135.15. BoJ Governor Kuroda is not convinced though that there is much further room for the USD/JPY to continue marching higher unless the Fed to delivers faster and more rate hikes than currently planned," MUFG adds.
MUFG Research discusses USD/JPY outlook and sees a scope for further gains in the near-term.
"The BoJ’s contrasting stance with other major central banks leaves JPY vulnerable to further weakness in the near-term at least while the sell-off in global equity markets has paused for now. It has been notable that renewed yen selling pressure in recent weeks has also coincided with a relief rally for global equity markets," MUFG notes.
"Yen weakness is likely to accelerate further if USD/JPY breaks above 135.15. BoJ Governor Kuroda is not convinced though that there is much further room for the USD/JPY to continue marching higher unless the Fed to delivers faster and more rate hikes than currently planned," MUFG adds.
CAD: BoC May Deliver A Larger 75bps In July; USD/CAD To Drift Towards 1.20 Through Year-End - Credit Agricole
Credit Agricole CIB Research discusses CAD outlook and maintains a bullish bias through year-end.
"The CAD has been supported by the combination of (1) an extended rally in oil prices, as they were hardly impressed by the OPEC+ promise to ramp up production in the coming months; and (2) a more hawkish BoC in June as it stands ready to act more forcefully after back-to-back 50bp rate hikes. At this stage, the second driver may not offer much more of a boost to the CAD in the near term, unless the BoC is to step up its tightening with the delivery of a larger 75bp rise in July," CACIB notes.
"Ultimately, prospects of high energy prices for longer could be a more solid backbone for additional CAD gains further down the line, albeit coming more as a slow-burner support than an immediate boost. Our forecasts continue to look for USD/CAD to slowly drift towards 1.20 for the rest of the year, while a light domestic agenda is unlikely to provide any sort of catalyst next week," CACIB adds.
Credit Agricole CIB Research discusses CAD outlook and maintains a bullish bias through year-end.
"The CAD has been supported by the combination of (1) an extended rally in oil prices, as they were hardly impressed by the OPEC+ promise to ramp up production in the coming months; and (2) a more hawkish BoC in June as it stands ready to act more forcefully after back-to-back 50bp rate hikes. At this stage, the second driver may not offer much more of a boost to the CAD in the near term, unless the BoC is to step up its tightening with the delivery of a larger 75bp rise in July," CACIB notes.
"Ultimately, prospects of high energy prices for longer could be a more solid backbone for additional CAD gains further down the line, albeit coming more as a slow-burner support than an immediate boost. Our forecasts continue to look for USD/CAD to slowly drift towards 1.20 for the rest of the year, while a light domestic agenda is unlikely to provide any sort of catalyst next week," CACIB adds.
USD/JPY: Trading The FOMC And BoJ - Nomura
Nomura Research discusses the USD reaction around this week's FOMC and BoJ policy meetings.
"The most important event for USD/JPY this week is the FOMC meeting on Wednesday. Although the market has priced in the possibility of a 50bp hike in September at 80-90%, the initial reaction is likely to be a stronger USD/JPY if the median 2022 dots is 2.875% and a weaker USD/JPY if it is 2.625%.
Actual JPY buying intervention is still unlikely, but the BOJ’s reaction this week is crucial for JPY. Although we do not expect the BOJ to change its policy at this week’s meeting, after the BOJ shared concerns over rapid JPY weakness with the government in the statement, Governor Kuroda’s comments on FX may clearly change, potentially judging JPY weakness is no longer positive for Japan’s economy. Then, investors’ expectations for BOJ normalization may recover, which would likely strengthen JPY," Nomura notes.
"Recent price action has been disappointing for our bullish JPY view, but we still believe USD/JPY retracement is likely into H2 this year, maintaining USD/JPY short exposure via digi put options (125, expire on 5 September)," Nomura adds.
Nomura Research discusses the USD reaction around this week's FOMC and BoJ policy meetings.
"The most important event for USD/JPY this week is the FOMC meeting on Wednesday. Although the market has priced in the possibility of a 50bp hike in September at 80-90%, the initial reaction is likely to be a stronger USD/JPY if the median 2022 dots is 2.875% and a weaker USD/JPY if it is 2.625%.
Actual JPY buying intervention is still unlikely, but the BOJ’s reaction this week is crucial for JPY. Although we do not expect the BOJ to change its policy at this week’s meeting, after the BOJ shared concerns over rapid JPY weakness with the government in the statement, Governor Kuroda’s comments on FX may clearly change, potentially judging JPY weakness is no longer positive for Japan’s economy. Then, investors’ expectations for BOJ normalization may recover, which would likely strengthen JPY," Nomura notes.
"Recent price action has been disappointing for our bullish JPY view, but we still believe USD/JPY retracement is likely into H2 this year, maintaining USD/JPY short exposure via digi put options (125, expire on 5 September)," Nomura adds.
USD: Overvaluation Worsens; GBP: A Recession Upson US - Credit Agricole
Credit Agricole CIB Research discusses the USD long-term fair-value and GBP near-term outlook.
"The recent USD broad rally has aggravated its overvaluation against the rest of G10 according to our latest G10 VALFeX model update based on the most recent quarterly data as of Q122. In particular, while the USD uptrend seemed to follow the currency’s improving real rate advantage against most of the G10 currencies, the FX gains contrasted with a loss of real yield advantage and relative productivity across the board," CACIB notes.
"A combination of weak economic data, returning Brexit fears and fragile global risk sentiment has sunk the GBP more recently and could keep it on the defensive in the very near term. Recent GDP data has suggested that the slowing UK economy has lost considerable momentum and may be on course to contract already in Q2 while the Johnson government proposed legislation yesterday that, if voted into law, will allow UK ministers to overturn the Northern Ireland (NI) protocol," CACIB adds.
Credit Agricole CIB Research discusses the USD long-term fair-value and GBP near-term outlook.
"The recent USD broad rally has aggravated its overvaluation against the rest of G10 according to our latest G10 VALFeX model update based on the most recent quarterly data as of Q122. In particular, while the USD uptrend seemed to follow the currency’s improving real rate advantage against most of the G10 currencies, the FX gains contrasted with a loss of real yield advantage and relative productivity across the board," CACIB notes.
"A combination of weak economic data, returning Brexit fears and fragile global risk sentiment has sunk the GBP more recently and could keep it on the defensive in the very near term. Recent GDP data has suggested that the slowing UK economy has lost considerable momentum and may be on course to contract already in Q2 while the Johnson government proposed legislation yesterday that, if voted into law, will allow UK ministers to overturn the Northern Ireland (NI) protocol," CACIB adds.