Tag Archives: forex recommendations

FXC Trading Image

NZD/USD Look To Re-Enter Strategic Short – BNZ

 

BNZ look To re-enter a strategic short position on NZD/USD. In a note to clients they report “NZD has bounced back admirably from cyclical lows hit after the RBNZ dropped its tightening bias. But the medium-term outlook is still negative, even with recent strong gains in dairy prices at auctions. We would consider rallies toward 0.76 as
opportunities to enter strategic short positions, targeting 0.70″.

They also note “we feel that levels above 0.7550 offer attractive risk-reward for a strategic NZD/USD short, on the premise that the mega-rally in the USD continues to grind higher. We would set a wide stop, 0.77 or higher, as is prudent in volatile markets such as these”.

Sell NZD/USD at 0.7550, stop >0.7700 with a profit target of 0.7000.

Source: BNZ

FXC Forex Image

USDCHF eyes 0.9529 as gold referendum looms

 

Capital Trust Markets reports “the US Dollar (USD) extended upside movement against the Swiss Franc (CHF) on Thursday, increasing the price of USDCHF to more than 0.9630 ahead of the Swiss Gold Referendum. The short term sentiment remains bearish due to Lower High on the daily chart thus the pair is expected to print a Lower Low below the 0.9529 support area.

Technical Analysis

As of this writing, the pair is being traded around 0.9635. A hurdle can be noted around 0.9660, the 61.8% fib level ahead of 0.9691, the 76.4% fib level and then 0.9740, the swing high of the last upside rally as demonstrated in the following chart.

On the downside, the pair is expected to find a support around 0.9610, the 38.2% fib level ahead of 0.9579, the 23.6% fib level and then 0.9529, the swing low of the recent downside move.

Gold Poll

Switzerland seems to be in the eye of a storm lately, as several indications have resulted in a code red situation. The Swiss Franc is trading at its highest level versus the Euro since 2011 when the central bank had to intervene in the forex market to safeguard its purchasing power. The USD/CHF exchange rate is also vital for the Swiss economy, and the Swiss National Bank needs to keep a very close eye on this exchange rate as (unfortunately for Switzerland), the CHF is still widely being considered as a safe haven. Back in 2011 the fear for the collapse of the Eurozone was absolutely real and investors were scrambling to get their hands on Swiss Francs in a flight to safety.

 Trade Idea

Keeping in view the overall technical and fundamental outlook, selling the pair around the current levels still appears to be a good strategy in short to medium term. The trade should however be stopped out on a daily closing above the 0.9741 resistance area”.

(Source: Capital Trust Markets)

rsz_aus_flag

Sell AUDUSD – JP Morgan

 

JP Morgan suggest to clients to go short AUDUSD, they report “commodity currencies extended their slide in tandem
with commodity prices this week. Brent has taken the brunt of it, but the move lower in commodities has been
relatively broad-based with iron ore, coal and gold all declining, and only livestock and agriculture faring better. Next week, a key event risk for commodity currencies is the monthly China data release. Our economists expect a month of stability, but notably, their forecasts for FAI, retail sales, IP and CPI are all below consensus. While there are considerable errors around these forecasts, our bias is to trade commodity FX from the bearish side, especially given that most of them appear too expensive relative to terms of trade. AUD stands out in this regard: its largest commodity exports are iron ore, coal and gold and all three have been hit hard recently, resulting in a material decline in its commodity index (chart 4), it appears rich on our short term fair value models and spec shorts are not yet that extreme in AUD (as they are in other commodity currencies such as RUB, BRL and NZD).

Sell AUD/USD in cash at 0.8609. Stop at 0.8860.

JP Morgan AUD Nov14

 

(Source: JP Morgan)

FXC Notes Image

Outlook for AUD/USD exchange rate – CBA

 

CBA forecast AUDUSD to fall over the next 12 months, they reason -

  • „ Strong demand for the USD vis-à-vis the JPY and EUR will continue to lower AUD/USD. AUD cannot remain immune.
  • „ However, Australia’s terms of trade are also falling as commodity prices, particularly the iron ore price, declines.
  • „ Australia’s two-year bond yield is below the RBA’s cash rate and the Australia-US two-year bond spread is narrowing.
  • „ A firmer USD, declining commodity prices and narrowing Australia-US yield spreads will further guide AUD/USD lower.
  • „ While the Australian trade-weighted index is holding up much better, it too risks edging lower on the above factors.
  • „ Our forecast for AUD/USD depreciation next year is occurring earlier than anticipated. The USD is not correcting lower.

 

Our current AUD/USD forecasts are tabled below. They have the AUD declining to 0.8500 in September 2015. While the AUD typically undertakes a 20.5% annual trading range (it has averaged this every year since the currency floated in December 1983), the forecasts provide guidance of the likely medium-term direction. We are forecasting the AUD lower. But the speed of the decline has been aided by the current USD bid in the market vis-à-vis the JPY and EUR. The rapidly declining Australian terms of trade and the downward pressure on the Aus-US interest rate spreads have only added to the depreciation pressure on the AUD being brought forward”.

cba aud nov 14

(Source: CBA)

Forex Chart

UPDATE – Forex recommendation – Sell GBPNOK – JP Morgan

Trade stopped out
———————————————————————————————————-

JP Morgan suggest to clients to go short GBPNOK. They report “in our opinion there is too much pessimism priced onto the Norwegian money market curve. NIBOR forwards price the certainty of a 25bp rate cut next year and the
grand total of just 10bp in net tightening by the end of 2017. The Norges Bank by contrast currently has unchanged policy through 2016 and 50bp of tightening by end-2017. The Norges Bank did not update its forecast at
this week’s meeting; nevertheless the statement it released afterwards conveyed a still rather neutral tone, which moderately disappointed the rate bulls as the Norges Bank did not dwell overly on the 10% drop in the oil
price since its previous meeting, Instead the Norges Bank highlighted the contrast between deteriorating external
conditions and improving domestic conditions, whereby lower mortgage rates, firmer house prices, a more expansionary budget and a weaker currency are helping to offset the increased drag from global growth.

One could also make the case that the UK rate curve is now too dovish on BoE policy (the first hike is not priced
until 4Q15), but unlike the krone, sterling has fallen by less, not by more, than is justified by the downgrading of interest rate prospects. The result: GBP/NOK is some 2% higher than its short-term fair-value – chart 3. In addition, certain key aspects of the data point to a more pronounced loss of momentum in the UK’s hitherto peerless rate of growth – service sector output stalled in August for the first time in over a year; mortgage
approvals are 19% lower than their peak at the start of the year; retail sales growth slowed to 1.3% saar in 3Q from 6% in 2Q.

Finally, there are a number of structural factors which may exacerbate sterling’s sensitivity to a weak patch of
growth, namely a record current account deficit combined with faltering M&A demand for GBP as the US government successfully acts against tax inversion deals that have tended to favour UK take-over targets.

Sell GBP/NOK at 10.605 with a stop at 10.82“.

JP Morgan GBPNOK Oct14

(Source: JP Morgan)

FXC Notes Image

FX recommendation – AUDUSD buy on dips

 

Capital Trust Markets reports “after a couple of soft releases on Monday, U.S. Dollar bulls found themselves in dire need of positive data today. Unfortunately for them, Durable Goods decreased again this month, pushing the greenback lower against all major counterparts.

Technical Analysis

AUDUSD28thoctober

After four long weeks of choppy price action behavior within an increasingly tighter range, Aussie appears ready to correct some of the losses incurred throughout September against the U.S. Dollar. Today’s rally broke above several lower highs formed in October, triggering a stop avalanche as AUD/USD short positions were shaken out of the market.

Spot is currently trading around 0.8865 as the 28th/10 European trading session draws to an end. Since AUD/USD is above 200 Simple Moving Average on 4H timeframe, traders will now systematically target the largest resistance levels in this area. First resistance is located close by at 0.8890 – 0.8900, marked by 9thOctober high and a proven pivot zone. If price breaks above this line, round psychological level of 0.9000 will follow soon afterwards.

The preferred strategy is to buy dips and bullish breakouts above resistance levels, as AUD/USD should maintain a bullish swing configuration of Higher Highs and Higher Lows for the time being. Immediate dips should be capped at 0.8820/30, where stop losses from long positions are likely to begin accumulating”.

(Source: Capital Trust Markets)

FXC Trading Image

USDJPY look for traction above 108.10 – OCBC Bank

 

OCBC Bank report to clients on the USD-JPY, that “amid growing voices calling for a delay in the sales tax hike and recovering risk appetite levels, any resumption of broad based dollar strength may see the pair continuing to drift higher. On the CFTC front, net leveraged net shorts were pared in the latest week but note that these numbers pre-dated the subsequent improvement in global risk appetite levels. In the near term, stay on the lookout for any traction above 108.10, with any sustained breach likely to pave the way to the recent highs around 110.00 multi-session. On the downside however, 106.80 may beckon if investor sentiment fizzles”.

(Source: OCBC Bank)

Forex Chart

EURAUD set for further declines next week

 

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.

Technical Analysis

EURAUD24thOctober

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)

Forex Chart

EURJPY buyers eye short term gains

 

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.

Technical Analysis

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.

EURJPY23rdOctober

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)

FXC Trading Image

FX recommendation – Buy AUDNZD

 

ANZ suggest clients to take a tactical long trade on AUDNZD. They report “with the AUD/USD trading closer to fair value and near its 2014 lows further downside requires some shift in fundamentals to provide the impetus for a
move.

Currently the signals that we are receiving are somewhat mixed. Domestic dynamics are neutral, while those in China are becoming more positive. In the near-term, a sparse US data calendar means that the USD (the likely catalyst of the downside break in the AUD) is going to be range-bound, awaiting a catalyst to resume its appreciation. Domestic dynamics are neutral as the RBA remains on hold, and the economy remains relatively stable at below trend levels. This was borne out in the recent RBA minutes where the bank repeated the phrase that “the most prudent course was likely to be a period of stability in interest rates”.

On the other-hand, in China, there is some evidence that we are nearing a trough for growth:
• Septembers IP report showed stabilisation;
• Commodities have found a near-term base and
steel prices are rising again;
• Property sales volumes picked up during the
golden week;
• Interest rates are falling, possibly indicating that
credit easing is finally working its way through the
system; and
• PMIs are highlighting that the external pulse is also
improving with export orders series rising.

In the near-term this could provide some upside for the AUD – though we caution that this will be a tactical shift, rather than a true fundamental shift. Recently there has been a significant short-term relationship between the AUD and commodity prices and so any recovery in China is likely to have an impact on the AUD. We still think that the broad trend for the Chinese economy is towards a less credit driven, lower investment intensity structure, which will have lower multipliers. This is highlighted by the relationship between the China economic surprise index and the AUD. It shows that, while a directional relationship remains, and some upside should be expected on a China recovery, the beta is lower than it was.

However, the beta is still positive and upside is likely if, as we expect, the Chinese economy has found a near-term base.

We think that this AUD rally is tactical, rather than strategic. Using the end of 2013/early 2014 as a blueprint, we think strength should not be extrapolated too far. In that instance we saw liquidity selectively injected into the system, yields then fell, and growth stabilised. The authorities then tightened liquidity again. The same pattern is likely to play out again this time, with stabilisation as the primary policy goal. When this is achieved, broader structural goals are likely to dominate, and liquidity will once again be restricted.

However, like in March, positioning is short and expectations are low and as such a tactical opportunity exists for the AUD. This is best expressed through buying AUD/NZD at 1.1015, with a stop just below the 200DMA at 1.0850, and an initial target at the high of 1.13“.

anz audnzd oct14

(Source: ANZ)

 

FXC Forex Image

EURDKK downward pressure to resume

 

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)

FXC Forex Image

EURNZD further losses expected

 

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.

Technical Analysis

EURNZD21stOctober

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)

FXC Notes Image

Sell EURUSD at 1.2845 limit – SwissQuote

 

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“.

eurusd swssquote oct14

(Source: SwissQuote)

FXC Trading Image

Sell AUDJPY – JP Morgan

 

JP Morgan suggest to clients to get short AUDJPY. They report “many factors make AUD vulnerable to additional
declines: rich valuations, sensitivity to global growth concerns through lower commodity prices as well higher
volatility, and finally the upcoming CPI report. The market has already taken down its expectations for inflation and is looking for a benign outcome for 3Q given the repeal of the carbon tax but J.P. Morgan forecasts (0.3%q/q for headline, 0.4% for the core) are still below that of the market (0.4% for the headline and 0.55% for the core). If our forecast is realized, it would leave 6M annualized rates of headline and core inflation around the bottom of the RBA’s target band and would reinforce the idea that risks are biased towards more disinflation in Australia than currently forecast by the RBA. Finally, RBA minutes to be released next week should also be interesting as they will focus on RBA’s shifting narrative on China. By contrast, JPY will be the only currency that is insulated against a further decline in oil prices and will benefit if vol increases further.

Sell AUD/JPY in cash at 93.50. Stop at 95.25“.

(Source: JP Morgan)

FXC Forex Image

Barclays trade idea for the week

 

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”.

(Source: Barclays)