Barclays suggest to their clients to sell EUR/JPY. They note “we remain bearish on EURJPY from a fundamental viewpoint given the elevated uncertainty around Greece’s solvency and increased risks of failed negotiations with the Eurogroup on 24 April”.
Credit Agricole report “some downside risks for EUR could linger as well. In particular, uncertainty about Greece should continue to haunt the single currency, with concerns about the country’s debt-sustainability likely to escalate as the bailout extension draws to an end in June.
Long-term risks should still be on the downside, however, and we expect EUR/USD to hit parity in Q3 with the USD-rally resuming as we get closer to the Fed’s first hike”.
Source: Credit Agricole
Credit Suisse report “we are now of the view that the market is increasingly willing to hold short EUR positions on crosses in G10 space. If EUR really does replace JPY as the funding currency of choice due to negative rates, this trend can have a lot further to run, to EUR’s overall detriment.
We are revising our EURUSD forecast set to 1.05 in 3m (1.09 prior) and 0.98 in 12m (1.02 prior)”.
Source: Credit Suisse
In a note to clients, Credit Agricole report that “in order to push EUR/USD considerably lower from current levels Fed rate expectations may need to rise further. As there seems to be scope for the Fed to consider higher rates as soon as mid-year, we anticipate further diverging monetary policy expectations to the detriment of the pair.
We remain short EUR/USD targeting a move towards 1.06″.
Source: Credit Agricole
BNP Paribas recommend to client to take a short EURAUD trade. They report “we see opportunity to short EUR vs high yielders amid a positive risk-taking environment. AUD is resilient to falling commodity prices and our positioning
indicator suggests further scope for EURAUD shorts.
We initiate a short EURAUD trade recommendation at 1.4260 targeting 1.3805 with a stop loss at 1.4490.
We expect EURAUD to trade lower during periods of improving risk appetite. While the Fed’s QE3 progamme has now officially come to a close, we expect increasingly aggressive easing programmes from the ECB and BoJ to provide
offsetting support for markets. Combined monetary base growth for the major central banks is likely to continue through 2015. We continue to favour long positions in risk-sensitive currencies funded in EUR and JPY and are now initiating a short EURAUD trade recommendation at 1.4260 targeting 1.3805 with a stop loss at 1.4490″.
(Source: BNP Paribas)
SwissQuote report “the tensions in Switzerland have been mounting over the past weeks due to unexpectedly balanced election polls on the Gold Referendum. However we believe that the rational will finally win over the Swiss gold debate. In our opinion, the markets have gone well beyond themselves. EUR/CHF edges the oversold conditions (RSI at 30%), the 1-month implied volatility advanced to 4.45%, highest levels over more than a year. The 1-month (25-delta) EUR/CHF risk reversals became quite negative as demand for put options increased overly. The rational calls for action. Given our biased view in favor of a “no” outcome, we believe that there is opportunity in the topside OTM calls. On the spot markets, EUR/CHF is seen at optimal entry levels for long EUR/CHF positions”.
Capital Trust Markets reports “EUR/JPY bulls look to 145.66 as a possible target following a strong break above 143.50 resistance level.
EUR/JPY has been trading around a key pivot level for the past two weeks, first rejecting off 143.50-144.20 without a bearish continuation, only to cross above this level on Tuesday 11th November. Spot is currently around 144.44 half-way through the 13th/11 U.S. trading session, with a strong bullish bias after a successful re-test and bounce of 143.50, this time performed from above.
Stochastic remains at extreme overbought levels on Daily, indicating a temporary top and a deeper correct are both long overdue. That being said, swing configuration maintains a higher highs and higher lows structure, pointing to future gains in the next trading sessions. Depending how EUR/JPY reacts at 145.66, coupled with reactions post-GDP reports on Friday, we could see the start of a correction soon, since the most recent bullish swing is showing a considerable slow-down in the uptrend.
Based on the current technical landscape, if EUR/JPY fails to rally higher and turns around, a break below 143.33 will invalidate the Higher Lows structure. This should trigger a stop hunt from long positions accumulated below this area, pushing EUR/JPY back to 141.00″.
(Source: Capital Trust Markets)
Westpac suggest to clients to take a short trade on EUR/USD. They reason-
Macro: EUR/USD remains heavy even as some data points (e.g. PMIs) begin to show tentative signs of stability and resentment with Draghi’s policy path from the conservative faction of the ECB Governing Council lingers despite his stronger language at the Nov meeting. These developments should have offered more support for EUR than has been the case. Despite that, yield spreads continue to push against EUR/USD, anchoring the pair lower. EUR/USD downmove is likely to extend to 1.22 on this leg. EUR may fare better on select European crosses though.
Model: Draghi’s strong commitment to steer the Bank’s balance sheet back to early 2012 levels (signed off by the Governing Council) has tipped the model back into EUR shorts via a weaker total yield signal. That said, the position is only moderate at -6.4%. While our EUR growth signal is also firmly negative the model seems unlikely to return to aggressive EUR shorts (i.e. of the order of -20% of the portfolio) anytime soon. In the wake of the single currency’s fall this year long term valuation has swung from a meaningful negative to neutral, implying that either our growth and/or total yield signals need to turn even more negative to nudge the model into outsized EUR shorts.
Technical: Monday’s bounce provided a healthy correction from which to launch the next leg down. Target further decline towards 1.20/1.21.
Trade: Short EUR at 1.2435; stop above 1.26; target 1.21
Societe Generale on the Swiss gold referendum report “the EUR/CHF vol market is in the starting blocks as the gold referendum places the SNB between a rock and a hard place. However, we believe that the final market impact will be higher EUR/CHF spot and lower volatility, whatever the outcome. A “yes” win could see a test of the floor and the SNB sweeping speculators via FX intervention in order to defend its credibility. In the event of a “no”, the market would unwind its precautionary long CHF positions. As such, we recommend buying a zero cost calendar structure taking advantage of a bullish spot move and a normalisation of volatility”.
(Source: Societe Generale)
SwissQuote report the “EURCHF continues to grind lower, increasing the speculation that it’s only a matter of time till the SNB will have to step-up and defend the EURCHF “floor”. On the fundamental front, given the erosion in European economic data it’s increasingly likely that the ECB will engage in some type of policy that will debase the EUR (potentially expanding the banks’ balance sheet by as much as €1 trillion). The recovery of Swiss KoF leading
indicator to 99.8 from 99.1 indicates that pace of economic cooling remains mild. Finally, despite the FOMC ending QE, guidance indicates that the zero interest rate policy would remain “for a considerable time”,
meaning the upward moment in USD should taper. Overall, it’s unlikely that strength in USD will outweigh weakness in the EUR hence creating demand pressure on the CHF (pushing EURCHF to 1.20).
Domestic Savers holding CHF
While safe-haven flows have eased according to SNB data, the CHF remains in uncomfortable high demand. With strong domestic demand keeping the CHF elevated vs EUR, the SNB will have a difficult time protecting EURCHF floor with any other tool except direct FX intervention. Negative interest rates, the most likely second response to any threat against the minimal exchange rate, becomes politically difficult when directed against domestic savers and when not targeted at foreign speculators. Changing domestic investor’s liquidity choice is a significantly problematic proposition. Particularly when global yields provide little natural incentive to lure investors out of the relative safety of CHF. In addition, we don’t know in the context of global low yields how effective driven rates negative would actually be, but perhaps would only drive domestic investors into an already white hot real estate market. Options available to the SNB are becoming scarcer and the reality of a collision between the market and the SNB is growing. Watch for EURCHF to head lower”.
Societe Generale report “EUR/USD is likely to stay down as the front end of the UST curve reprices from low levels. However, reserve managers et al still need to offload considerable amounts of EUR treasuries, cash, short term paper into longer dated UST. This combines with an equity market digesting the news means that most of the move is one in the USD and front end UST as the Fed path is repriced. EM which had done well pre-Fed meeting should still benefit eventually from a sense that the US economy is recovery. There the wealth effect of a recovering US economy will eventually come through trumping the subsitutiton effect (Fed tightening). EUR/USD will have no such luck as it is all driven by substitution. USDCAD there is an inbetween case between EM and EURUSD”.
(Source: Societe Generale)
Societe Generale report on the Swiss referendum, they report “on 30 November Switzerland will vote on a referendum to prevent the SNB from selling Gold and forcing it to maintain 20% of its foreign reserves in Gold. The ban on selling Gold would go into effect immediately and the SNB would have five years to reach the 20% requirement. Over the five-year period, the SNB would have to sell part of its currency reserves (or theoretically print money) to finance the Gold purchases. Currently this amounts to selling USD68bn, mainly by selling EUR and USD, to buy 1,783 tons of Gold.
If the referendum were voted into law, the SNB could bypass it by retaining the tranche of foreign reserves needed for liquidity management while splitting off the rest in a Sovereign Wealth Fund nominally under the control of the ministry of finance. This would leave the SWF outside the definition of foreign reserves in the referendum.
The latest poll by gfs.bern indicated that 44% of voters support the Gold initiative, a move which the SNB is clearly against (SNB statements).
A gift to the markets. The new Gold rule would be the equivalent of giving a large put to the market. Each time Gold collapses, the SNB would automatically buy Gold so that the 20% reserves ratio is maintained, and this would presumably be achieved by mostly selling EUR and USD.
EUR/CHF short-term vols should see a mild bid as investors could use the poll as an excuse to challenge the EUR/CHF floor. The market would then start to speculate on an SNB rate cut to negative interest rates, especially as short-term rates are lower in the eurozone than in Switzerland”.
(Source: Societe Generale)
EUR/AUD selling pressure remains high even as the trading week is about to end. Capital Trust Markets reports “since bears are reluctant to take profit, we might see a deeper decline early next week on a break below support.
Despite a significant bullish spike in the early hours of Asian trading, sellers were quick to bring EUR/AUD back in line. The pair is once again trading just above the 100-Day Simple Moving Average, priced at 1.4372, a level strengthened by 38.2% Fibonacci retracement calculated between 5th September Low at 1.3798 and last week High of 1.4704. Since price action is currently stuck between all the large moving averages, we could see a prolonged consolidation in this area or a break lower to re-test old support levels.
With spot currently trading around 1.4387, EUR/CAD is showing a large bearish engulfing bar on Daily. Stochastic shows increasing weakness with plenty of room to spare until oversold territory is reached. A break below 1.4358 will immediately expose 1.4300/10, where 50-Day Simple Moving Average and October’s low must be broken in order to form a Lower Low and completely change the technical landscape to bearish. Medium-term targets follow at 1.4251 and 1.4144; however a short retracement is likely to materialize before the second level is reached.
Stop losses from short positions will begin to accumulate above today’s high at 1.4512, making a break above this level an instant invalidation of our bearish scenario”.
(Source: Capital Trust Markets)
On Thursday Euro managed to completely turn the tables against a weakening Yen. Capital Trust Markets reports “EUR/JPY shows multiple bullish technical signals, all pointing to future gains toward 138 and possibly even 139.15.
EUR/JPY rally began in the early hours of European session; when Euro sentiment received a boost as Spanish Unemployment Rate unexpectedly dropped to 23.7% while German and Euro-zone PMIs finally showed signs of stabilizing.
Late last week EUR/JPY showed the first reversal signs following its 700 pip sell-off down from 141 to 134. A large bullish Pin bar led buyers above the resistance trendline, also invalidating the Lower Highs swing structure. Unfortunately this rally was short-lived, with EUR/JPY falling back as market participants appeared reluctant with the newly found direction.
Today’s rally confirms a bullish perspective, since a higher Low was formed on the 61.8% Fibonacci retracement level based on last week’s upswing. Price action is showing a large Bullish Engulfing bar as EUR/JPY is currently trading around 136.88. 20th October high at 137.00 was briefly tested during the U.S. session. A rally above this level will constitute a fresh buy signal, prompting buyers to target the 200-SMA line at 137.73 and the large pivot zone at 138.00. A secondary upside target resides at 139.15, where the 200-Day Moving Average will likely cap any rallies on their first attempt.
This newly formed bullish scenario is likely to remain valid as long EUR/JPY maintains a Higher High/Higher Low configuration above 135.22″.
(Source: Capital Trust Markets)
Danske Bank suggest EUR/DKK will fall further, they report “we stick to our fundamental view, that the downward pressure on EUR/DKK will resume in the near term due to two reasons.
1) Relatively tight DKK liquidity. Liquidity in the DKK money market will remain relatively tight compared to the abundance of liquidity early in the year, when banks’ net position with the central bank was around DKK200bn. It is currently slightly above DKK100bn but will be squeezed to DKK80bn in the final days of October, before increasing to DKK150bn (absent DN FX intervention purchases) at the end of the year. The early taxation of capital pensions remains a downside risk to liquidity the rest of the year and next year – see FX Edge: High pension tax income to weigh on EUR/DKK near term, 30 September. With a quarter of the year remaining DKK29.3bn in early taxation has been paid – close to the government’s estimate of DKK30bn for the whole of 2014.
2) Renewed speculation of further ECB easing. Low inflation, a further decline in inflation expectations and overall weak key figures from the euro area, hinting that current economic growth is relatively weak, may in the near-term fuel anticipation in the market of further easing from the ECB. The ECB may prefer to await the effect of the upcoming second TLTRO auction scheduled for December before deciding on additional easing, though. We forecast EUR/DKK at 7.4475 on 1M and 3M. However, due to the reasons stated above we see risk that the downward pressure on EUR/DKK around the 7.4430 level, the low in September when DN purchased DKK0.7bn in intervention, may resume in the near term and trigger additional DN FX intervention purchases and a unilateral 10bp rate cut before year-end. In the medium term we forecast EUR/DKK at 7.4450 on 6M and 12M. As we expect the negative carry on short EUR/DKK in the FX forward market to prevail in the shorter dates, we recommend Danish pension funds with EUR exposure to hedge their exposure in the longer dated EUR/DKK FX forwards, i.e. from 4Y and beyond”.
(Source: Danske Bank)
Euro suffered a broad sell-off against a basket of currencies on Tuesday. Among other pairs, EUR/NZD tumbled below a 2-week range with Capital Trust Markets reporting it “signals more losses in the near future.
While it’s still early in the day to make definitive conclusions, today’s euro weakness is likely to persist, leading into a much deeper sell-off as the long term downtrends take over the markets once again. EUR/NZD has been predominantly choppy for two weeks now, with price action stuck in a very narrow range between 1.6015 and 1.6200/50. From a technical perspective price, stayed on the bullish side during this period, above the 200 SMA on 4H and Daily, coupled with consistent higher swing lows.
Consequently, today’s break is viewed as a strong bearish signal now that sellers are searching for a new lower low. While 200 SMA acts as resistance EUR/NZD is going to aim lower. 50-Dau and 100-Day are unlikely to represent huge resistance levels. Instead, we see 1.5700 as a huge attraction point, based on previous reactions which confirmed this level as a strong pivot zone.
Daily stochastic is heading towards oversold territory; however there’s still plenty of room for this move to develop even further. Bears should watch out for possible reversals back above 1.6000. Price stabilizing in this region could trigger a prolonged period of choppy behavior”.
(Source: Capital Trust Markets)
SwissQuote recommend to clients to sell EURUSD on limit. They report “EUR/USD has faded near the resistance at 1.2901. Monitor the hourly support at 1.2706 (16/10/2014 low, see also the rising channel). Another hourly support lies at 1.2625 (15/10/2014 low). An initial resistance can now be found at 1.2845 (16/10/2014 high).
In the longer term, EUR/USD is in a downtrend since May 2014. The break of the strong support area between 1.2755 (09/07/2013 low) and 1.2662 (13/11/2012 low) has opened the way for a decline towards the strong support at 1.2043
(24/07/2012 low). As a result, the recent strength in EUR/USD is seen as a countertrend move. A key resistance stands at 1.2995 (16/09/2014 high).
Sell limit 2 units at 1.2845, Obj: Close unit 1 at 1.2710, remaining at 1.2501, Stop: 1.2911“.
Barclays report to clients on their trade idea for the week. They suggest “stay short EURGBP: Our economists pushed forward the timing of first hike by the BoE from November 2014 to February 2015, but our constructive view on the UK economy remains intact and we believe the market is pricing in too much dovishness from the BoE. Our view on relative monetary policy between the BoE and ECB – that the former to start policy normalization while the latter to announce EGB QE in Q1 2015 suggests that EURGBP will continue to decline in coming months. Our forecast for Euro area and UK data this week is mixed relative to consensus, but we prefer selling EURGBP on any rallies”.