Forex Insider Daily Update 1 June 2017

Major Bank Daily Position

USD/CHF - Credit Suisse - LONG Position - From 0.9735 - Stopped out at 0.9691 (S/T) -44 pips

EUR/USD - Danske - SHORT Stop Order - Placed - Entry: 1.1167, Target: 1.0850, Stop: 1.1350 (M/T)

EUR/GBP - Barclays - SHORT Stop Order - Placed - Entry: 0.8710, Target: 0.8314, Stop: 0.8854 (M/T)

Major Bank Daily Analysis & Insights

Deutsche Bank

DB advises clients to start building short EUR/USD positions as the pair approaching 1.15 targetting a move back below 1.1 over the summer.

DB outlines 6 reasons behind this call:

1.       European data surprises are at extremes.

2.       A soft taper is already priced.

3.       The euro is completely mispriced to short end rates.

4.       Market consensus has turned bullish Euro.

5.       Equity inflows are approaching previous peak.

6.       The Fed is very underpriced.

BofAML

BofAML expects a summer rally in USD/JPY.

Such a potential rally, according to BoafML, should be backed by receding external political risks, inexpensive valuation and solid fundamentals.

In particular, BofAML argues that the risk/reward balance on NKY, USD/JPY and EUR/JPY seemd to have already shifted as positive risks were likely to be more pronounced than negative risks.

“We continue to view the USD/JPY in a medium term bull market. We will be more concerned about currency diplomacy if the USD/JPY rallies decisively beyond 120.

We would buy dips into USD/JPY 120 and sell strength above the level.”

NAB

NAB argues that the BOJ is unlikely to change in the foreseeable future including the current commitment to YCC, USD/JPY sensitivity to movements in US Treasury yields will remain elevated for sometime to come.

“On this, our rate strategies note the tendency 10Y Treasury yields to rise ahead of both Dec 2016 and March 2017 Fed hike- and with that USD/JPY. The Fed looks on track to hike in June, subject to key upcoming data release.

“We retain our bias for US data and inflation in particular to recover and assuming no further rise in US political risk, we remain as comfortable as we can be with our USD/JPY 114 target for June.

ABN AMRO

ABN AMRO notes that Eurozone inflation dropped lower in May, as headline rate declined to 1.4%, down from 1.9% in April, while core rate dropped to 0.9%, down from 1.2% in April.

“The fact that core inflation has fallen back below 1% will probably be a set-back for ECB. Still in its recent communication the central bank has already shifted in the direction of putting more weight on economic growth as a lead indicator of core inflation than on the current trends in underlying inflation. Indeed, we think the robust level of economic growth and high PMI levels will likely push the ECB towards a gradual exit from unconventional policies,” ABN AMRO argues.

“We expect the ECB to taper its asset purchases from early next year and to hike its deposit rate in the second half of that year. The first step in the exit process will come with a change in communication in our view at next week’s governing council meeting. The forward guidance will likely become more neutral, dropping the explicit possibility of cutting rates or stepping up QE,” ABN AMRO adds.